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Anyone hoping for a more affordable housing market in Vancouver will be disappointed if a Scotiabank Economics report proves correct.
“Though demand-supply conditions are improving, affordability is expected to remain a concern,” writes Marc Desormeaux, an economist and policy analyst for Scotiabank Economics, in a report published this week.
As of the end of July, there were 11 per cent more units under construction than over the same period in 2017, while the number of complete but unsold units is up 10 per cent, according to the report — but don’t count on that increase in supply to push prices down meaningfully.
“Despite the [year-to-date] increase, Vancouver’s inventory of unabsorbed homes remains well below its long-run average, building on the shortfall accrued in recent years and indicating further price increases are likely ahead,” Desormeaux continues.
In August, the benchmark price of a Metro Vancouver home was $1,083,400, up 4.1 per cent from a year ago but down 1.9 per cent since May, according to the Real Estate Board of Greater Vancouver. Year-to-date prices are up 3.7 per cent as of August, the report states.
Meantime, homebuying activity appears to be picking up once again. Sales, though down 27.4 per cent so far this year, climbed 2.9 per cent in August from July, and that “suggests the market may be at an inflection point,” Desormeaux notes.
“With more moderately priced dwelling types continuing to see strong upward price pressures, acute affordability pressures are likely to persist near-term for prospective modest- and middle-income homebuyers,” says Desormeaux notes.
Provincially, the report suggests the affordability picture is somewhat brighter looking ahead. “While risks remain, solid full-time job creation and a recovery in multiple sectors with falling unemployment to date should support BC housing demand and economic growth this year and next. An upswing in new construction should limit further erosion of housing affordability,” says Desormeaux.
In a separate report released last week, Central 1 noted that BC housing starts rose in August, marking the second consecutive month that contractors broke ground for an increasing number of units.
Housing starts hit a seasonally adjusted annualized rate of 48,300 homes last month, flying 28 per cent above the level reached the same time last year and up 8 per cent from July. The rate of construction in Vancouver, however, was “virtually unchanged,” Central 1 found.
The census metro areas of Victoria and Kelowna were the main drivers for the increased pace of housing construction.